Tax News & Views: Health Care Edition

October 2016 | Vol. 12 No. 30

Tax News & Views: Health Care Edition is a timely news summary bulletin authored by the Health Care Industry Group, Deloitte Tax LLP. The newsletter contains highlights from the latest tax developments in health care on Capitol Hill, at the White House, at the Internal Revenue Service, at the Treasury Department and in the courts. It is a valuable resource for tax and other professionals involved in the tax-exempt health care providers and health plans sectors, helping them remain current on tax developments that stand to have an impact on their businesses.

Section 501(r) Regulations in Effect

The IRC Section 501(r) regulations are effective for any taxable year after December 29, 2015. For hospitals with June 30 fiscal year, this means the Regulations were effective July 1, 2016. By the first day of the hospital’s fiscal year, the hospital facility should have in place a compliant financial assistance policy, a compliant emergency medical care policy, and a compliant billing and collections policy. Hospital facilities must also have in place a process for calculating amounts generally billed to individuals who have insurance (AGB) and for confirming that amounts charged to the financial assistance policy eligible individuals are not more than AGB for medical necessities and emergency care, and less than gross charges for all other care.

In addition, organizations that completed a Community Health Needs Assessment (CHNA) for fiscal years ending in 2013 should have a new CHNA completed by the close of their fiscal year ending in 2016. Implementation strategies should be adopted no later than the 15th day of the fifth month after the end of the fiscal year. For example, a hospital facility that completed its last CHNA as of its fiscal year ending June 30, 2013 should have completed a new CHNA by June 30, 2016 and should adopt the implementation strategy by November 15, 2016.

Deloitte is receiving a number of questions around the implementation of the Regulations specifically in conjunction with effective dates. One of the most common questions is how to treat individuals who received services prior to the effective date but billing for the services that occurred after the effective date and after an update of internal policies. We have also been fielding questions about presumptive qualification for financial assistance and how those processes may need to be factored into the analysis of whether a hospital is in compliance with the Regulations. Deloitte is providing advisory guidance to certain hospitals for developing procedures for monitoring ongoing compliance with the Regulations once policies have been implemented and additionally for identifying that the policies as designed are functioning to keep a hospital in compliance with the final Section 501(r) Regulations.

If your organization has any questions related to the regulations or any other matter, please reach out to your Deloitte contact.

Inactive Organization Losses Exemption

In LTR 201637016 dated June 10, 2016, the IRS issued its final adverse determination revoking the exempt status of an inactive charitable organization. The organization stated that its activities included working with other organizations to put on events, shows, festivals, and seminars. However, the organization showed no income or expense from any of the activities, and the organization was not able to produce evidence of any activities conducted or planned. As a result, the IRS found that the organization had no regular exempt financial activities or operations conducted or planned for an unspecified number of years and was therefore not operated exclusively for exempt purposes.

Although it is unclear from LTR 201637016 how many years the organization was dormant, organizations should note the arguments made by the IRS in revoking the organization’s exemption. (1) A lack of conducted or planned activities is a lack of operations. An organization that lacks operations is not operated exclusively for one or more exempt purposes. (2) A lack of income or expenses also constitutes a lack of activities by an organization.

Did you know?

FASB Overhauls Guidance on Presentation of Financial Statements for Not-for-Profit Entities

The September 12, 2016 edition of Deloitte Heads Up discusses FASB Accounting Standards Update No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, which significantly changes the presentation requirements for financial statements of not-for-profit entities (NFPs). The amendments are intended to improve the guidance on net asset classification as well as the information presented in the financial statements and financial statement notes regarding liquidity, financial performance, and cash flows for NFPs. Specifically, the ASU addresses (1) the complexity and understandability of net asset classifications, (2) the lack of consistency in the type of information provided about expenses, and (3) inconsistencies in the reporting of (a) operating information in the statement of activities and (b) operating cash flows in the statement of cash flows. Link to the Heads Up.


CMS will give clinicians two additional options for participating under MACRA

In his September 9, 2016 Reg Pulse Blog Post, Andy Slavitt, Acting Administrator of the US Centers for Medicare and Medicaid Services (CMS), announced in a blog post that CMS will give clinicians two additional options for participating under MACRA. This announcement only gives clinicians flexibility on the reporting requirements and does not change the start date for the first performance period. Based on the CMS blog post, it appears that only clinicians who do not report any information under MIPS and do not meet the Advanced APM thresholds will receive negative payment adjustments. CMS did not give greater detail on the new options. However, Slavitt said in the announcement that stakeholders can expect the final rule by November 1, 2016, which will provide additional details. For more information on MACRA, please see the September 13, 2016 or the September 20, 2016 edition of Deloitte’s Health Care Current.

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Additional Resources

Deloitte Center for Health Solutions

Deloitte Center for Health Solutions: The source for health care insights: The Deloitte Center for Health Solutions (DCHS) is the research division of Deloitte’s Life Sciences and Health Care practice. The goal of DCHS is to inform stakeholders across the health care system about emerging trends, challenges, and opportunities.

Health Care Current

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

This edition

Section 501(r) Regulations in Effect

Inactive Organization Losses Exemption

Did you know?

  • FASB Overhauls Guidance on Presentation of Financial Statements for Not-for-Profit Entities
  • CMS will give clinicians two additional options for participating under MACRA

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